Woodward Reports First Quarter Fiscal Year 2013 Results

FORT COLLINS, CO—(Marketwire – Jan 22, 2013) – Woodward, Inc. (NASDAQ: WWD) today reported financial results for its first quarter of fiscal year 2013. (All per share amounts are presented on a fully diluted basis.)

First Quarter Fiscal 2013 Highlights

Net sales for the first quarter of 2013 were $408.3 million, compared to $407.9 million in the first quarter of last year.
Earnings per share were $0.39 in the first quarter of 2013 compared to $0.40 in the first quarter of last year.
Total EBIT1 for the quarter was $44.9 million compared to $46.4 million in the first quarter of the prior year, a decrease of 3 percent.
Free cash flow2 for the first quarter of 2013 was $10.1 million, an increase of $25.0 million from a net outflow of $14.9 million in the first quarter of the prior year.
“Sales in the first quarter of fiscal 2013 were affected by both normal seasonal ordering patterns and increased fiscal and economic volatility,” said Thomas A. Gendron, Chairman and Chief Executive Officer. “While global fiscal challenges during the coming year may have a substantial impact on 2013, we continue to expect improved results for the remainder of the year.”

Net sales for the fiscal 2013 first quarter were $408.3 million, compared to $407.9 million for the 2012 first quarter.

EBIT was $44.9 million for the first quarter of 2013 compared to $46.4 million for the first quarter of 2012. The current quarter EBIT was primarily impacted by continuing investments in Aerospace manufacturing capacity and capability, as well as acquisition costs, offset by decreased variable compensation. Foreign currency exchange rates had a negative impact of approximately $2 million on EBIT for the quarter.

Net earnings for the 2013 first quarter were $27.4 million or $0.39 per share compared to $28.4 million, or $0.40 per share in the 2012 first quarter.

On December 28, 2012, Woodward acquired from GE Aviation Systems the hydraulic thrust reverser actuation systems business located in Duarte, California (the “Duarte Business”) for approximately $200 million in cash. The Duarte Business, which has been consolidated into Woodward’s Aerospace segment, had no impact on net sales, EBIT or net earnings for the first quarter of 2013.

Quarterly Segment Results

Aerospace

Aerospace net sales for the first quarter of fiscal 2013 were $211.4 million, an increase of 9 percent from $193.2 million for the first quarter a year ago. Segment earnings for the first quarter of 2013 were $31.6 million compared to $27.1 million for the same quarter a year ago, an increase of 17 percent. Segment earnings as a percent of segment net sales were 14.9 percent this quarter compared to 14.0 percent in the same quarter of the prior year.

The sales increase was due to commercial OEM sales and strong military aftermarket sales. Segment earnings were positively impacted by the higher sales volumes and lower variable compensation, partially offset by expenses associated with improved manufacturing capacity and capability.

Energy

Energy net sales for the first quarter of fiscal 2013 were $197.0 million, a decrease of 8 percent from $214.7 million for last year’s first quarter. Segment earnings for the first quarter were $23.9 million, compared to $26.7 million for last year’s first quarter. Segment earnings as a percent of segment net sales were 12.1 percent this quarter compared to 12.4 percent in the same quarter of the prior year.

Strong sales of compressed natural gas systems were offset by a significant decrease in wind turbine converter sales in North America and softness in other reciprocating engine and industrial turbine systems sales. Segment earnings were primarily impacted by the decreased sales volume partially offset by reduced variable compensation and improved pricing.

Nonsegment

Nonsegment expenses totaled $10.6 million for the first quarter of fiscal 2013, compared to $7.4 million for the same quarter last year. Nonsegment expenses were 2.6 percent of consolidated net sales for the first quarter of 2013, up from 1.8 percent of consolidated net sales for the same quarter of the prior year. Nonsegment expenses for the quarter were primarily impacted by acquisition costs for the Duarte Business.

Cash Flow and Financial Position

Net cash generated from operating activities was $40.0 million for the first quarter of 2013, compared to $2.3 million for the prior year quarter primarily the result of cash inflows from strong sales in the fourth quarter of fiscal 2012. Free cash flow for the first quarter of 2013 was $10.1 million compared to a net outflow of $14.9 million for the first quarter of 2012, an increase of $25.0 million. Capital expenditures for the first quarter of 2013 were $29.9 million compared with $17.3 million in the same quarter of 2012.

Total debt was $590.0 million at December 31, 2012 and reflects new debt in the quarter of $200.0 million used to finance the acquisition of the Duarte Business. Excluding this new debt, total debt declined to $390.0 million at December 31, 2012 from $392.2 million at September 30, 2012.

Outlook

“Overall economic uncertainty continues to impact the markets we serve. We still see market share growth in our Aerospace segment, while in our Energy segment, growth in natural gas is being offset by the significant decline in the wind turbine market,” said Mr. Gendron. “Including our recent acquisition, we now anticipate that fiscal 2013 sales will be between $1.9 billion and $2.0 billion, and earnings per share will be between $2.22 and $2.42 per share, including approximately a $0.07 per share effect of the fiscal year 2012 retroactive impact of the U.S. research and experimentation credit for fiscal 2013 that will be recognized in the second fiscal quarter of this year.”

Non- U.S. GAAP Financial Measures: EBIT (earnings before interest and taxes), EBITDA (earnings before interest, taxes, depreciation and amortization) and free cash flow are financial measures not prepared and presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Management uses EBIT to evaluate Woodward’s operating performance without the impacts of financing and tax related considerations. Management uses EBITDA in evaluating Woodward’s operating performance, making business decisions, including developing budgets, managing expenditures, forecasting future periods, and evaluating capital structure impacts of various strategic scenarios. Management uses free cash flow, which is derived from net cash provided by operating activities less payments for property, plant, and equipment, in reviewing the financial performance of Woodward’s various business segments and evaluating cash generation levels. Securities analysts, investors, and others frequently use EBIT, EBITDA and free cash flow in their evaluation of companies, particularly those with significant property, plant, and equipment, and intangible assets that are subject to amortization. The use of these non-U.S. GAAP financial measures is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. Because EBIT and EBITDA exclude certain financial information compared with net earnings, the most comparable U.S. GAAP financial measure, users of this financial information should consider the information that is excluded. Free cash flow does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. Management’s calculations of EBIT, EBITDA and free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as comparative measures.